Save Money by Trusting Yourself

Every day I hear about people contorting their finances because they don't trust themselves to be responsible. Avoid the contortions. You can save a lot by trusting yourself. (See also: It's All Your Money)

Of course, there's a second step. You have to be worthy of that trust.

Trust Yourself in the Grocery Store

I wrote about one small version on this a while ago, in a post on Buying Groceries European-Style. It was a reaction against the idea that sticking to your list was the only way to avoid making budget-destroying impulse buys. My point was that if it keeps you from buying stuff cheap when there's an unadvertised sale, sticking to your list costs you money. Much better is to trust yourself to make the right decision there in the grocery store.

Of course then you have to be worthy of that trust. Going off your list to buy asparagus because it's fresh and cheap, or to buy a roast for 75% off because it's almost at its sell-by date are great ideas. Going off your list because they put a new flavor of pretzels near the checkout line is a bad idea. (Which is not to say that you can't put pretzels on your list.)

Trust Yourself With Credit

A much bigger deal is using credit safely. Especially if you don't have a proper emergency fund, a judicious use of credit can save you a lot of money.

The specific example that prompted this post was a radio story about how the rent-to-own model had moved into the tire business. A woman interviewed for the story was making weekly payments to rent tires. If she made all the weekly payments she'd own the tires, but she'd have paid double what they would have cost if she'd just charged them on a credit card. The woman explained that she didn't have access to credit — and further, that she didn't want access to credit, because she couldn't be trusted with credit.

If you can trust yourself to use credit only when it saves you money — to avoid having the power turned off, costing you a reconnect fee (plus the contents of your refrigerator), to avoid having your car insurance canceled, costing you your drivers license (plus all the money you'll ever earn, if you're in an accident) — you can save thousands of dollars a year.

If you're not worthy of that trust — if you use credit to live beyond your means — you can very quickly ruin your life.

Trust Yourself With Cash

Probably the first story I wrote on this topic was a short bit from back in 2007, in which I recommended that people carry some cash. I got a lot of comments from people who couldn't trust themselves with cash — if they had money in their pocket, they spent it.

My point was that, even in this age of debit cards and online payments, there are still some problems that are most easily solved with actual cash money. If you can trust yourself with cash, you're in a position to solve those problems in the easiest way.

It is entirely possible to decide how much you want to spend and what you want to spend it on — and then actually spend exactly that much to buy exactly those things. And if you can do that, it doesn't make any difference whether you have cash or plastic in your wallet, or both.

Trust Yourself to Be Productive

As a personal example, when I quit working a regular job I had to trust myself to be productive without a manager to monitor my productivity. This was a big deal for me, because I'd always thought of myself as a fundamentally lazy person. I thought there was a real danger that, having no boss to check up on whether I was getting stuff done, I might not get anything done.

Instead, it turned out to unleash my productivity. I've written over four hundred Wise Bread posts, other writing assignments here and there, and continued with my fiction writing. I've done it while helping my wife run our household, improving my diet, and greatly improving my exercise regime (to the point that I'm in the best shape of my life).

It was a great insight to realize that, all those years I thought I was lazy, I just didn't want to do stuff that wasn't what I wanted to do. Once I trusted myself to be productive at the stuff I did want to do, I was able to improve practically everything about my life.

Trusting myself turned out to be one of the best decisions I've ever made.

Trust Yourself — and Be Worthy of That Trust

The key, of course, is that trusting yourself only saves you money if you're worthy of that trust.

Can you trust yourself to make the right decision on the spur of the moment? I think anybody — no matter how easily swayed by advertising, no matter how susceptible to the lure of shiny things — can develop the ability to make the right decision about small matters. Getting it right in the grocery store is not hard, and if you make the occasional mistake (and come home with a bag of expensive pretzels in the latest flavor) your actual loss is small.

With big decisions the stakes are higher. It's worth creating some structure to support making wise decisions. The most basic structure, of course, is a budget — think about what you want and arrange your finances so that you get as much of what you want as possible. (Budgeting is not about denying yourself stuff. Budgeting is about getting what you want most.) By deciding in advance, you reduce the chance that you'll see something that's so, so shiny that you simply must have it now, only to realize only later that there's other stuff you'd rather have.

A budget is a tool. So is a shopping list — it's another useful tool. Of course, there's a difference between having a shopping list so that you don't forget something you need and having a shopping list that you won't deviate from, even if you see something fresh and cheap that you want. The former is a tool. The latter is a shackle that you're locking yourself into.

To my mind, creating a budget is the ultimate expression of self-trust — it's a concrete step that you've taken to empower smart decision making.

When I talk about "contorting your finances," I'm taking about something different. I'm taking about concrete steps taken to disempower stupid decision making. For example, many people put a physical obstacle in the way of making poor decisions — only carry a few dollars in your wallet, keep your credit cards locked in your desk, etc. If you want to spend more than you've budgeted, you have to make a special ATM visit. If you want to charge something on a credit card, you have to home and get the card. (An extreme version of that I've seen is to freeze your credit cards in a block of ice, so as to put it that many more minutes away from use.)

These sorts of tricks are generally harmless, but I tend not to recommend them. Like a crutch, some people may find them indispensable. But also like a crutch, it's better to develop the strength and balance you need to get along without it if you possibly can.

More drastic measures, such as not having credit cards at all, can do real harm to your finances — as in the case of the woman renting-to-own her car tires. That's a lifestyle choice beyond merely using a crutch; it's more like using a leg brace. Again, if you really need it, it's better than having to do without it. But if you can develop trust in yourself — and then be worthy of that trust — you're ahead of the game.

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Lisa #1

This is SO true. When I trust myself, I do just fine. I slip up some times (self awareness is new to me) but when I get back on track I'm really proud of myself. Thank you for taking the time to write it down.